Five years ago, Japan introduced a feed-in tariff system in a bid to promote the introduction of renewable energy on a large scale following the collapse of public trust in nuclear power due to the Tohoku earthquake and tsunami on March 11, 2011, and subsequent triple meltdowns at the Fukushima No. 1 nuclear power plant.
Under the scheme, utilities were obliged to purchase solar, wind, mini-hydro, geothermal and biomass-generated electricity at a fixed rate for a fixed number of years.
Feed-in tariffs have been used in other countries, especially in Europe, to kick-start renewable energy investment by major utilities and start-up firms, and to spur technological innovation, thus leading to lower costs for consumers.
In Japan, however, the powerful “nuclear village” of ruling party politicians, local governments hosting nuclear power plants, bureaucrats in the Ministry of Economy, Trade, and Industry, major energy-consuming businesses, the politically connected utilities, as well as influential pro-nuclear academics and media had long viewed renewable energy as unsafe, unstable and insecure in terms of producing a steady supply of electricity at a competitive cost.
Today, however, more and more people in government and industry are embracing the renewable energy revolution. Trade shows in Japan draw thousands of people nationwide, from hundreds of firms, both small and large, and are often supported by both METI and the major utilities.
There remains a high level of hope for the future — albeit tempered by better-understood technological, financial and political challenges — as Japanese entrepreneurs and corporate leaders check out the latest advances in solar panel technology, wind turbines, biomass generation, battery storage technology and smart grids.
A glance at the statistics shows overall growth in renewable energy since the 2012 feed-in tariffs were introduced. That growth has been slower than advocates originally hoped, but there was a sign last year of what may lie ahead.
Japanese newspaper headlines on May 4, 2016, either touched on long-standing political issues such as constitutional revision and the Upper House election that was due to take place that summer or on economic and financial issues such as the high value of the yen and a fall in Asian stocks. There was nothing to indicate that, at least for Japan’s renewable energy industry, it was a historic day.
For about one hour around noon, some 46 percent of the country’s electricity needs were being supplied by renewable sources, according to an August report by the Tokyo-based Institute of Sustainable Energy Policies and based on utility figures. For the entire day, renewables, including large-scale hydro, provided 27.4 percent of the nation’s electricity. Over the course of the entire month of May 2016, renewables, including hydro, accounted for more than 20 percent of the country’s energy supply.
The May 4 level was unprecedented, but exceptional. Official figures from METI would later show renewable energy nationwide, including that from large-scale hydro plants, accounted for about a 15-percent share of the country’s total electricity production in fiscal 2016. Natural gas was the main electricity source (41 percent of the total), followed by coal (30 percent). Petroleum accounted for about 11 percent of the total, while nuclear power, which the government continues to promote, accounted for only about 2 percent.
Japan introduced the feed-in tariff system in 2012 in the face of strong opposition by the utilities, which had their nuclear power plants shut down after March 11, 2011. The central government, especially METI, had legitimate concerns about the high cost and reliability of renewables, but it was also worried that excessive public enthusiasm for them, plus opposition to nuclear power, would create, to use METI’s favorite phrase during the postwar period when it had strong control over nascent industries, “confusion in the marketplace.”
The result was that only five types of renewable energy (solar, wind, geothermal, mini-hydro and biomass) were chosen for the feed-in tariffs. Prices were set high to encourage investors but the feed-in tariff periods for each energy source were long. Solar prices were initially set at ¥42 per kilowatt-hour (kWh), between ¥23 and ¥57/kWh for wind, depending on output, and ¥27 to ¥42/kWh for geothermal. Different rates were set for different scales of small-scale hydro power (all less than 3 megawatts), ranging from ¥25 to ¥35/kWh. For biomass, the feed-in tariffs ranged from ¥13/kWh for recycled wood products to about ¥41/kWh for biogas.
As all of these rates were set sometimes well above the cost to generate renewable-produced electricity, there was an initial rush of new firms, especially in solar, resulting in a lot more renewable electricity. A September report by the Japan Renewable Energy Institute said the estimated amount of electricity generated by approved installations under the FIT in fiscal 2016 was 57 tetra-watt hours — “equivalent to the annual electricity consumption of all households in Tokyo and six other Kanto-area prefectures (18.89 million households),” the report said.
The percentage of renewable energy, including hydro-generated electricity, jumped from about 9 percent nationwide in fiscal 2011 to 15 percent in fiscal 2016 under the feed-in tariffs. However, certain parts of Japan did even better.
In Kyushu, figures for Kyushu Electric Power Co. compiled by the Institute for Sustainable Energy Policies show that renewable energy accounted for 16.7 percent of its electricity. On May 4, 2016, it made up 37.6 percent of Kyushu Electric’s generation, and over the entire month of May 2016, renewables accounted for 24 percent of Kyushu’s electric power.
In 2015, the government, worried about relying too much on one form of energy and anxious to restart the aging nuclear power plants, drew up a long-term energy policy. It set a goal for renewable energy sources to account for between 22 and 24 percent of the total energy mix by 2030, while nuclear power was to account for 20 to 22 percent, with liquid natural gas (27 percent) and coal (26 percent) as the other major sources. Since 2015, however, discussions have been taking place on revising those figures to rely less on nuclear power and more on renewables.
At the same time, the high tariffs offered in 2012 began coming down, with the central government making adjustments to the feed-in tariff scheme each year. In April of this year, a new series of prices was announced.
For 10kW-2MW nonresidential solar power plants, the tariff was set at ¥21/kWh (excluding tax). For nonresidential solar plants generating more than 2,000 kW, a new bidding system has been introduced, with those in the industry setting the tariffs and the highest bid becoming the purchasing price for all. The first bidding is set to take place in October and no one can bid less than ¥21/kWh.
The tariff for land-based wind power will drop to ¥21/kWh in October, while offshore wind will be ¥36/kWh. The latter’s potential has excited many, and over the past five years, industry experts and local governments have estimated that Japan might have hundreds of nuclear power plants’ worth of offshore wind generation it could tap into.
But according to Noboru Chiba, general manager of the Japan Wind Power Association, there are some very tough problems for that energy source, starting with cost.
“While offshore wind farms have made progress in parts of Europe, the emphasis in Japan has been — and will continue to be for a while — onshore wind power first. Offshore wind power comes at a high cost,” Chiba said.
In order for renewable energy to grow more rapidly, the government, industry experts, local governments and academics have all pointed to technical, economic, financial, environmental, legal and political hurdles that must be overcome or mitigated. Here, by main renewable energy source, are some of the major ones:
Although the price for solar power generation continues to decline, the spread of solar plants, especially mega-solar farms, is creating other problems. The September 2017 report by the Japan Renewable Energy Institute noted that there were concerns about the impact of solar panel development on natural and historical landscapes, and disaster management aspects, especially flood damage due to heavy rains and increasingly severe typhoons that damage or destroy solar panels.
Even though solar photovoltaic (PV) cells had an installed capacity of 33.5 gigawatts as of the beginning of 2017, and despite some industry predictions that the figure could be ramped up to 150 gigawatts by 2030 due to declining costs, the government is warning investors and consumers against relying too heavily on that as a single renewable source.
“Prices for solar PV continue to drop, and the New Energy and Industrial Technology Development Organization has set a target for the costs of solar PV for homes to be ¥14/kWh by 2020, and ¥7/kWh by 2030. However, the feed-in tariff system won’t last forever. People need to think about what happens after it ends, and invest in other energy sources,” Yoshihiro Sugiyama of the Agency for Natural Resources and Energy told participants at a renewable energy technology exhibition in Osaka in late September.
Wind power in Japan has a difficult history. In the past, well before the feed-in tariffs, wind farms were sometimes located in areas that were less than ideal, chosen more because a local lawmaker had good connections in Tokyo and wanted to bring home the funding for construction of wind turbines in his constituency rather than because that particular location had ideal wind speeds and consistency.
As of 2015, there was about 3.1 gigawatts of wind power and another 7 gigawatts worth of projects still undergoing an environmental impact assessment. The association believes a target of 10 gigawatts by 2020 and 36 gigawatts (for both on and offshore wind) by 2030 is not unrealistic.
However, Chiba lists several specific issues that need addressed, starting with the mandatory environmental impact assessment on wind power projects.
“In addition to technical difficulties such as ideal wind speed and the costs of bringing wind power from distant places like Hokkaido, Tohoku and Kyushu to the major cities, environmental restrictions mean projects can take a long time to get approval because of the assessment process,” he said.
On the other hand, complaints from local communities about noise from wind turbines are heard less than in the past, Chiba said. But more of an effort must be made to encourage the decommissioning of older turbines, whose numbers are increasing, and to introduce higher performance turbines.
There are many types of biomass, but woody biomass generation has recently begun to get more attention from renewable energy advocates. Tetsuo Kato, vice-chairman of the Japan Woody Bioenergy Association, listed some of the challenges the industry faced in really taking off.
“Land-use laws and regulations, local ordinances regarding the management of forests and environmental concerns that place restrictions on logging access roads are just some of the problems that woody bioenergy has to deal with,” Kato said. “However, Japan’s declining birthrate and population is also a great chance to change the structure of the forestry industry, to make it easier for biomass energy and to encourage sustainable forest management in an age of severe weather brought on by accelerated climate change.”
Mini-hydro power excites local communities, especially in rural areas with rivers and streams where mini-hydro plants can be built and deliver electricity easily. Issues are basically technical (consistent flow, ideal water speed, and proper angle of flow into the turbines), economical (competitive costs based on generation amount and grid connections) and environmental. Compared to other energy forms, mini-hydro has received noticeably less official attention.
Geothermal energy sources, especially in Oita Prefecture (home of the famous Beppu hot-spring resort) and parts of Tohoku, are abundant in Japan. Over the past five years, however, there has been virtually no new investment. The reasons are often financial (geothermal technology requires an extremely high initial investment, while maintenance costs are frequent and high). However, they can be political as well.
Many of the best locations for geothermal plants are near hot-spring resorts, whose politically-connected owners fear a geothermal plant in the area will either keep visitors away, or that drilling deep into a geothermal vent could lead to earthquakes, not a light concern (especially in Kyushu). With the government offering little incentive for new investment and development, geothermal power is likely to remain an under-utilized energy source except in local governments that have plenty of it.
Renewable energy exhibitions include not only solar, wind, mini-hydro, biomass and other energy technologies, but also the latest in battery and smart grid technologies that promote ever-more energy efficient homes, neighborhoods, towns and cities. As the recent renewable energy and smart grid expo in Osaka showed, regardless of sector, there remains the fundamental issue of actually getting the electricity to the customer at the cheapest possible rate.
On this point, one notices something of a split between advocates of “local production, local consumption” who see community-sponsored renewable energy and smart grids as the future, and those, including the government, who advocate more of a “top-down” approach that aims for a national future energy policy based on a specific quota for select energy sources.
However, access to power grids, which are almost always controlled by Japan’s 10 regional utilities, arguably remains the major problem for those firms that can generate electricity from renewables but can’t sell it.
Under the feed-in tariffs, the utilities can curtail purchases of renewable energy from producers for 30 days per facility per year without compensating the producers. As the Japan Renewable Energy Institute noted, they can also refuse connection agreements if curtailment is expected to go beyond 30 days. They can do this to balance supply and demand to ensure what they judge is a safe, stable and secure supply of electricity at the best price.
The solution to the problem was to create a rule that allowed utilities to not compensate generation facilities that were newly connected to the grid, in the hope that grid operators wouldn’t have to worry about paying if the curtailment went beyond 30 days and would thus accept more connection agreements from renewable energy producers.
However, renewable energy advocates worried that the new rule was problematic because if a regional utility decides on unlimited curtailment of renewable energy from producers, knowing it won’t have to pay, then the cost for producers (and the increased uncertainty of getting access) will rise — making business extremely difficult.
“As grid operators, they should be encouraged to improve the accuracy of predicting the variable renewable energy source and to make investment to avoid curtailment, but they are incentivized to move in an opposite direction,” the institute report said.
With the government determined to restart as many nuclear power plants as possible to meet the percentage goals of the national energy plan, and with utilities such as Kansai Electric Power Co. as well as the head of the powerful Nippon Keidanren business lobby saying that more nuclear power plants should be built, it’s clear the goal of the country’s staunchest renewable energy supporters, and broad swaths of the public, for as much renewable energy as possible as soon as possible at the expense of nuclear power, still faces powerful opposition within certain quarters.
The Oct. 22 snap election is expected to focus on issues such as financing an aging society, the success (or failure) of Abenomics, constitutional reform and, of course, North Korea.
While Yuriko Koike’s Kibo no To (Party of Hope) has proposed a “no nuclear power” policy, renewable energy, nuclear power and the country’s energy future did not, as the campaign began, appear to be the hot media issues they were five years ago.
The lights have stayed on these past five years largely without nuclear power (remember when senior corporate types and utility executives warned of rolling blackouts if the reactors stayed off?), although consumer electricity bills, especially for large-scale users, have gone up due to a combination of increased fossil fuel costs incurred since 2011 and the feed-in tariffs. In the meantime, thanks to the 2012 FIT, the renewable energy business sector in Japan continues to expand, innovate and attract new players, challenging Japan’s traditional energy sector and its meaning of what a safe, stable and secure energy future can look like.